09 December 2011

A word on the future of Europe (without the United Kingdom)

It's rare that I rant about politics but given the train wreck that we've woken up to here in Europe I thought I'd make the exception as this is important for all of us — both here in the 27 member European Union (technically while part of Europe, Switzerland's not part of the European Union nor the 17 member Eurozone as it has its own currency, but we're landlocked by it and affected by its instability) as well as abroad, including the United States.

I'm no expert on European politics, but having been a resident of the region for almost a decade now and lived and/or worked in three member states (in addition to Switzerland) I have the unusual advantage of having seen it from many angles:
  • From Ireland, which has been (and is to this day) a benefactor of the union by way of support for its relatively small economy and its inexplicably generous 12.5% corporate tax rate.
  • From France, which along with Germany is one of the powerhouses of the European economy with the most to lose if things go awry.
  • From Switzerland, which is an independent, neutral country that happens to be in the center of Europe and only recently joined the Schengen Agreement (relaxing its borders with France, Germany, Austria and Italy).
  • From the United Kingdom, which is a member state outside of the Eurozone with its own currency (British Pounds) that is isolated from the mainland by sea and apparently sees this as a reason to get special treatment.
The United Kingdom is a large and important economy in the zone, but even down to the grassroots level they see themselves as independent and assess every single decision solely on the basis of what it will do for them — there are regularly mini scandals in the papers about their relationship with their fellow Europeans (who are typically seen to be somehow benefiting at their expense). This shortsighted tweet captures the sentiment nicely:
As a prime example, the Common Agricultural Policy which is designed "to provide farmers with a reasonable standard of living, consumers with quality food at fair prices and to preserve rural heritage", tends to redistribute funds from more urbanised countries like the Netherlands and the United Kingdom to those where agriculture actually takes place. It's an important (albeit changing) function and it commands almost half of the EU's budget.

Another example of unnecessary friction is their [self-]exclusion from the Schengen Agreement, which creates a borderless area within Europe, thus facilitating transport and commerce. You still have to pass border control when you enter or leave the Schengen area, including when traveling to/from the Common Travel Area (consisting only of the United Kingdom and Ireland, which are connected on the island of Ireland by the border between the Republic of Ireland and Northern Ireland), but you can travel freely within it once you're there and there are visas which cover the entire region.

Cutting to the chase, it is of no surprise then that the brits would be stubborn when it came to changing the treaty by unanimous vote — indeed I've been predicting that for a while and was certain it would happen a few days ago. What is a surprise though is just how belligerent and childish they've been about it — as a frenchman said in reference to the following video from The Telegraph's excellent article EU suffers worst split in history as David Cameron blocks treaty change:

Another user tweeted:
Also retweeting:
A fair question if you ask me (and if the language upsets you more than the situation itself then you might want to reconsider your priorities). Others agreed:
And:
I think Simon Wardley sums it up nicely though:
From my point of view the brits are [allowing their representatives to get away with] acting like petulant children, benefiting from the European Union when it suits them, and taking their toys home when it doesn't. Their argument that the very establishment that got us into this mess must absolutely be protected above all else is weak — and that it is in the interests of the city, let alone the entire country, deceptive.

They "very doggedly" (their words) sought "a 'protocol' giving the City of London protection from a wave of EU financial service regulations related to the eurozone crisis". That's right, they didn't want to play by the same rules as everyone else, and exercised their veto when it became apparent that was the only option.

To add insult to injury, they "warned the new bloc that it would not be able to use the resources of the EU, raising real doubts as to whether the eurozone would be able to enforce fiscal rules in order to calm the markets". So not only are they going to not participate in cleaning up the mess they played a key role in creating, but they're going to do their best to make sure nobody else can either.

Fortunately there's light at the end of the tunnel: "Cameron was clumsy in his manoeuvring," a senior EU diplomat said. “It may be possible that Britain will shift its position in the days ahead if it discovers that isolation really is not a viable course of action.” Please take a moment today to express your discontent with this decision as sometimes in order to serve your own interests you also need to consider those of others — in much the same way as the tragedy of the commons (where in this case the commons is the European and global markets).

Update: Another great [opinion] piece from The Telegraph: Cameron: the bulldog has no teeth:
Cameron (and Britain) are now in a no-win situation. If the eurozone countries start to rally, then we shall be isolated from the new bloc and stuck in the slow lane of Europe. Should the euro problems deepen, then we shall bear the consequences in full. As George Osborne has indicated, a disorderly collapse of the euro would drag a voiceless Britain into depression.
...
In France and Germany, Cameron will be blamed for exacerbating a crisis by leaders who will brand him the pariah of Europe. Overnight, Britain has changed from a major player to an isolated outpost which, if this goes on, will become about as significant on the global stage as the Isle of Mull. Churchill would be turning in his grave.
Related:


9 comments:

  1. "The United Kingdom ... assess[es] every single decision on the basis of what it will do for them"

    You say that like it's a bad thing, or even an exception.

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  2. If everybody made every decision based on their own needs alone then we would be in a lot of trouble — it's a childish, hedonistic way to go about doing business and it doesn't work when you have multiple entities sharing the same resources.

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  3. I look at it as a football team: as long as every player (aka the countries) decide the most important thing is how they look themselves, they won't play like a team and in the end they will loose.

    If however they decide to go for a common goal and put aside their personal interests, they have a bitter chance of winning and in the end improve their own market value by more than being a hotshot in a losing team.

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  4. The issue is that politicians are short sighted - they mostly only care about being re-elected so taking the stance will probably improve his chances of being re-elected (since it will probably save some City jobs in the near future), whilst relegating long term issues to another government.

    He's not the first and won't be the last!

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  5. I love the football team analogy — nice one!

    @Rick: I'm afraid you might be right, but it's still hard to believe that someone would sell out not only their country, but the whole of Europe, for their own personal gain and that of their cronies.

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  6. The EU is an unelected un-representative bureauracy, it hasn't been able to get it's accounts signed off for 14 years!

    In common with most other bureaucracies it's less interested with the needs of the people it's supposed to serve and more interested in accumulating more power for itself.

    If the City has to pay a Tobin tax to the EU you can bet the money won't be spent in the UK and ultimately the UK taxpayer will end up funding the tax.

    The British electorate is in the unfortunate position of choosing between the unelected in city or the unelected in Brussels - some choice...

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  7. Going with the footy imagery a step further, players can and do bet then act against their own team and profit while they get away with it. Cricket has had that happen to it.

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  8. Hi Sam,

    Long time no speak - but have been following on Twitter/Facebook etc..

    Anyway - my 2 cents

    Last night I was reading some articles from Zero Hedge - now this is a doom and gloom outfit - but still well worth the read because of the accuracy and detail. (Balance this against Zero Hedge - http://www.thereformedbroker.com/2011/11/06/in-defense-of-zero-hedge-not-that-they-care/)

    Anyway, being based in Sydney these days I keep a close eye on what's going on in China, being one of our biggest trading partners - but with what's going on in Europe is crazy - the Politicians need to pull their finger out.

    But read through the first article I list below before *anyone* (especially the Brits!) trys to tell anyone else why the *City* needs to get excemption?

    AIG went down the gurgler based on Credit Swaps written in London because they would not have been able to write them in the US - and now that the whole pack of cards is coming down and they are trying to get things sorted the City wants to keep betting the Farm? Struth mate - wake up!!!

    Second article below - it's already ramping up in China and Hong Kong - the reality is today with the Internet things can (and do) happen at the speed of light. Over the past 200 plus years of high finance, traders and the like chase after a profit and they will dream up a new "name" or brand or concept to explain what they are doing and why/how the existing rules do not apply (See Shadow Banking in Article 1 ;-)) and eventually the door will be bolted - but typically only after the Horse has long gone. (Anyone remember Junk Bonds in the 80's?)

    I want to draw attention to two articles:
    http://www.zerohedge.com/news/why-uk-trail-mf-global-collapse-may-have-apocalyptic-consequences-eurozone-canadian-banks-jeffe

    and:
    http://www.zerohedge.com/news/are-dim-sum-bonds-next-chinese-reverse-merger-fraud

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  9. “It may be possible that Britain will shift its position in the days ahead if it discovers that isolation really is not a viable course of action.”

    In other words "give us London's money or be shafted from us in the future". Who exactly did you say was being childish here?

    "Please take a moment today to express your discontent with this decision as sometimes in order to serve your own interests you also need to consider those of others"

    The new tax on financial institutions was designed as a knowing way for the Eurozone to get maximum relief from a non-Eurozone entity (UK). Why should we pay into something we are not a part of?

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